The Fair Housing Act (FHA) is a critical guide for landlords, real estate agents, and property managers in ensuring that discrimination against renters is prevented.
Established to protect tenants from unfair treatment, the FHA provides a framework for creating rental applications and adopting evaluation processes that align with both federal regulations and additional state and local laws. Compliance with these guidelines is essential not only for legal reasons but also for maintaining a positive reputation in the housing market.
Why Understanding the FHA Is Essential for Property Investors
As a property investor, learning the FHA thoroughly is crucial for avoiding violations. The rental application and tenant screening process are areas where unintentional discrimination can easily occur if not handled with care.
Violating the FHA can lead to significant legal consequences, including financial penalties and damage to your business's reputation. In the long run, even a single violation can deter potential tenants from applying, reducing your pool of renters and negatively affecting your income.
Additionally, remaining compliant is vital even if you are only renting out one unit. Whether you manage multiple properties or a single-family home, adhering to the FHA ensures that your business operates ethically and legally. By understanding and applying fair housing principles, you not only protect your business but also contribute to a fairer rental market.
Defining the Fair Housing Act
The Fair Housing Act, initially passed in 1968 and amended in 1988, was created to promote equal access to housing across the United States.
It sets clear rules prohibiting discrimination based on a variety of personal characteristics. Specifically, the FHA protects individuals when renting or buying properties, ensuring that their personal attributes do not affect their housing opportunities.
The 1988 amendments expanded the act’s reach, adding additional protections for people with disabilities and families with children. These updates reflect the changing social and legal landscape, showing the law's adaptability to current societal values.
Who Are The Protected Classes Under The Fair Housing Act?
Under the FHA, seven classes of people are specifically protected from discrimination in housing-related activities. These classes are:
Race
Color
Sex
Religion
Disability
Familial Status (having children under the age of 18, including pregnant women)
National Origin
Discrimination based on any of these characteristics is strictly prohibited. This means landlords and property managers cannot refuse housing, set different terms, or impose restrictions on tenants or buyers from these classes. For example, you cannot legally refuse to rent a unit to a family with children simply because you prefer to rent to adults. Similarly, denying housing to someone based on their national origin or race would constitute a serious FHA violation.
Additional Protected Classes Under State and Local Laws
While the FHA provides broad protections at the federal level, many state and local laws go even further by safeguarding additional groups. It is crucial to understand these local laws to ensure full compliance. Some of the most common additional protected classes include:
Citizenship
Genetic Information
Veteran or Military Status
Age
Sexual Orientation
Criminal History
Source of Income
Gender Identity or Expression
For example, in some areas, it may be illegal to deny housing based on sexual orientation or gender identity. Similarly, many jurisdictions now have laws protecting individuals with criminal records from automatic disqualification in the rental process. Income source discrimination—such as refusing to rent to someone who receives government assistance—can also violate local regulations.
It's advisable to review both state and local laws regularly, as these can change over time, and certain municipalities may offer protections beyond what is outlined in federal law.
Exemptions to the Fair Housing Act
There are specific exemptions to the FHA where certain property owners are not bound by the same rules. These include:
Renting out or selling single-family homes without using a broker, provided you don’t own more than three such homes at a time.
If you live in a small building with four or fewer units and rent out the other spaces.
Religious organizations renting non-commercial properties can show preference to individuals of their faith. Similarly, private clubs that provide housing to their members are exempt from FHA regulations as long as the housing is not offered commercially.
How the FHA Is Enforced
The Department of Housing and Urban Development (HUD) enforces the FHA in several ways, including through the use of "fair housing testers." These testers pose as potential tenants or buyers to investigate whether landlords or property managers are adhering to the law.
HUD also investigates claims of discrimination filed by individuals, and penalties can be severe if violations are found.
Fair Housing Act Penalties
Committing an FHA violation can result in significant civil penalties, including:
Up to $19,787 for the first violation.
Up to $49,467 for a second violation.
Up to $98,935 for the third and subsequent violations.
These penalties are in addition to any damages you may be ordered to pay the victim of the discrimination. Given the steep costs, both financially and reputationally, it is crucial to avoid violations.
Tips for Avoiding FHA Violations
To stay compliant with the FHA, it’s essential to:
Allow service animals, even if you have a "no pets" policy.
Apply consistent rental screening processes for all applicants.
Avoid using discriminatory language in ads or property descriptions.
Avoid asking questions about protected classes, such as family status, race, religion, or disabilities.
Be familiar with local and state regulations, especially those offering additional protections.
By adhering to these guidelines and regularly updating your knowledge of fair housing laws, you can safeguard your business from violations and foster an inclusive environment for all potential tenants.
Bottom Line
Understanding and adhering to the Fair Housing Act (FHA) is essential for property investors, landlords, and real estate professionals. Ensuring that your rental application and tenant screening processes are compliant with federal, state, and local regulations helps prevent costly violations, protects your business reputation, and fosters an inclusive rental environment.
By staying informed about both federal protected classes and additional local protections, you can avoid discrimination, attract a diverse tenant base, and maintain legal compliance. If you have any questions don’t hesitate to contact KRS Holdings today!